Impact of 2017 Budget for Property Investors

The 2017 budget had more inclusions for local property investors than previous years, however it’s the foreign investors who will be affected the most. Furthermore, the Government’s resolution for the housing affordability crisis involves providing incentives to investors and superannuation funds. This is via increasing the Capital Gains Tax (CGT) discount for investors.

What do I need to know?

All deductions relating to the cost of travel to investment property will cease as at 1 July 2017.

Investors who purchase plant and equipment (such as dishwashers and ceiling fans) after 9 May 2017 will be able to claim depreciation deductions over the life of the asset. However, owners of a property will not be eligible for deductions on plant and equipment purchased by previous property owner. This will essentially reduce capital gains made on future disposal of the property.

Foreign owners will be charged a fee if their property is not occupied of available on the rental market for at least 6 months of the year. The fee is estimated to be at least $5,000 per annum.

Foreign and temporary residents will not be eligible from the main residence exemption which excludes private homes from capital gains tax.

From 1 July 2017 the CGT withholding rate will increase by 2.5% to 12.5% and the withholding threshold for foreign tax residents will reduce from $2 million to $750,000.

Foreign ownership in new developments will receive a 50% cap meaning that any new development will need to ensure that less than 50% of the purchasers are foreign residents.

If you’d like to understand more about how the new budget might affect your property portfolio or aspirations, please contact CPS Property today.